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The term structure of equity premia in an affine arbitrage-free model of bond and stock market dynamics

Lemke, Wolfgang; Werner, Thomas - European Central Bank - 2009

We estimate time-varying expected excess returns on the US stock market from 1983 to 2008 using a model that jointly captures the arbitrage-free dynamics of stock returns and nominal bond yields. The model nests the class of affine term structure (of interest rates) models. Stock returns and...

Persistent link: https://www.econbiz.de/10005002766

Sovereign risk premia in the European government bond market

Bernoth, Kerstin; von Hagen, Jürgen; Schuknecht, Ludger - European Central Bank - 2004

This paper provides a study of bond yield differentials among EU eurobonds issued between 1991 and 2002. Interest differentials between bonds issued by EU countries and Germany or the USA contain risk premia which increase with the debt, deficit and debt-service ratio and depend positively on...

Persistent link: https://www.econbiz.de/10005162910

Explaining exchange rate dynamics: the uncovered equity return parity condition

Cappiello, Lorenzo; Santis, Roberto A. De - European Central Bank - 2005

By employing Lucas’ (1982) model, this study proposes an arbitrage relationship – the Uncovered Equity Return Parity (URP) condition – to explain the dynamics of exchange rates. When expected equity returns in a country/region are lower than expected equity returns in another...

Persistent link: https://www.econbiz.de/10005162911

Liquidity constraints, risk premia, and themacroeconomic effects of liquidity shocks

Jaccard, Ivan - European Central Bank - 2013

business cycle volatility and have nonlinear effects on risk premia. Our empirical analysis suggests that the Great Recession …

Persistent link: https://www.econbiz.de/10010686744

Assessing the benefits of international portfolio diversification in bonds and stocks.

Santis, Roberto A. De; Sarno, Lucio - European Central Bank - 2008

This paper considers a stylized asset pricing model where the returns from exchange rates, stocks and bonds are linked by basic risk-arbitrage relationships. Employing GMM estimation and monthly data for 18 economies and the US (treated as the domestic country), we identify through a simple test...

Persistent link: https://www.econbiz.de/10005222282

European Union enlargement and equity markets in accession countries

Dvorak, Tomas; Podpiera, Richard - European Central Bank - 2005

The announcement of European Union enlargement coincided with a dramatic rise in stock prices in accession countries. This paper investigates the hypothesis that the rise in stock prices was a result of the repricing of systematic risk due to the integration of accession countries into the world...

Persistent link: https://www.econbiz.de/10005222330

Stock market volatility and learning

Adam, Klaus; Marcet, Albert; Nicolini, Juan Pablo - European Central Bank - 2008

and thereby excess volatility, persistence of price-dividend ratios, long-horizon return predictability and a risk premium …

Persistent link: https://www.econbiz.de/10005222379

International equity flows and returns: a quantative equilibrium approach

Albuquerque, Rui; Bauer, Gregory H.; Schneider, Martin - European Central Bank - 2004

This paper considers the role of foreign investors in developed-country equity markets. It presents a quantitative model of trading that is built around two new assumptions: (i) both the foreign and domestic investor populations contain investors of different sophistication, and (ii) investor...

Persistent link: https://www.econbiz.de/10005816253

Output growth and fluctuation: the role of financial openness

Popov, Alexander - European Central Bank - 2011

I analyze output growth, volatility, and skewness as the joint outcomes of financial openness. Using an industry panel …

Persistent link: https://www.econbiz.de/10009276057

Sovereign credit ratings, market volatility, and financial gains

Afonso, António; Gomes, Pedro; Taamouti, Abderrahim - European Central Bank - 2014

filtered using EGARCH specifications. The estimation results show that upgrades do not have significant effects on volatility …, but downgrades increase stock and bond market volatility. Contagion is present, with sovereign rating announcements … (increase) in volatility in other countries. The empirical results show also a financial gain and risk (value-at-risk) reduction …

Persistent link: https://www.econbiz.de/10010753741